Business Growth and Expansion

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Business Growth and Expansion

• Chapter 3.2

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I. Growth Through Reinvestment

• Business revenue can be used to invest in
  factories, machinery, or new technologies.
• Before reinvesting, a business must estimate its
  cash flow.
• Record total sales.
• Subtract all expenses, taxes, and depreciation.
• Total remaining net income.

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(I. Growth Through Reinvestment)

• Depreciation is added back to net income to get
  cash flow, or the bottom line the real measure
  of business profit.
• Business owners then deicide whether part of the
  cash flow should be reinvested in the business to
  generate additional sales and more profits.

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Discuss This

• What do you predict may happen when a business
  has little or no cash flow?

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II. Growth Through Mergers

• When firms merge, one gives up its separate legal
  identity.
• A company may merge with another to grow faster
  become more efficient acquire or deliver a
  better product eliminate a rival or change its
  image.

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(II. Growth Through Mergers)

• A horizontal merger is the joining of firms hat
  make the same product. A vertical merger is the
  joining of firms involved in different stages of
  manufacturing or marketing.
• A conglomerate is composed of four or more
  businesses, each making unrelated products, none
  of which is responsible for a majority of its
  sales.

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Discuss This

• Why have some multinational companies been
  criticized?